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1、macroeconomics fifth editionN. Gregory MankiwPowerPoint Slides by Ron Cronovichmacro 2002 Worth Publishers, all rights reservedCHAPTER FIVEThe Open EconomyCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 1Chapter objectivesaccounting identities for the open economysmall open economy modelwh
2、at makes it “small”how the trade balance and exchange rate are determinedhow policies affect trade balance & exchange rateCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 2Percentageof GDP4035302520151050CanadaFranceGermanyItalyJapanU.K.U.S.ImportsExportsImports and Exports as a percentage
3、of output: 2000CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 3In an open economy,spending need not equal outputsaving need not equal investmentCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 4PreliminariesEX = exports = foreign spending on domestic goodsIM = imports = C f + I f
4、 + G f = spending on foreign goodssuperscripts:d = spending on domestic goodsf = spending on foreign goodsCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 5Preliminaries, cont., cont.NX = net exports (a.k.a. the “trade balance”) = EX IMIf NX 0, country has a trade surplus equal to NXIf NX I
5、, country is a net lenderWhen S 0, S = 0,net capital outflows and net exports fall by the amount I NX2NX1I 1I 2SI (r )2CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 22The nominal exchange ratee = nominal exchange rate, the relative price of domestic currency in terms of foreign currency
6、(e.g. Yen per Dollar)名义汇率，实际汇率，购买力评价汇率。国际货币基金组织网站上有CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 23Exchange rates as of June 6, 2002countryexchange rateEuro1.06 Euro/$Japan124.3 Yen/$Mexico9.7 Pesos/$Russia31.4 Rubles/$South Africa9.8 Rand/$Turkey1,444,063.1 Liras/$U.K.0.68 Pounds/$直接标价：
7、6.2rmb买1美元间接标价：1/6.2,好处是rmb升值则这个值变大CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 24The real exchange rate = real exchange rate, the relative price of domestic goods in terms of foreign goods (e.g. Japanese Big Macs per U.S. Big Mac)the lowercase Greek letter epsilon通过相对价格调整，这个价格是同一时点不同国家
8、的物价水平CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 25Understanding the units of 理论上埃普西隆的值应该是1，如果大于一，则本国物价太低或者本币被低估CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 26one good: Big Macprice in Japan: P* = 200 Yenprice in USA: P = $2.50nominal exchange rate e = 120 Yen/$To buy a U.
9、S. Big Mac, someone from Japan would have to pay an amount that could buy 1.5 Japanese Big Macs. McZample CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 27 in the real world & our modelIn the real world:We can think of as the relative price of a basket of domestic goods in terms of a bask
10、et of foreign goodsIn our macro model:Theres just one good, “output.”So is the relative price of one countrys output in terms of the other countrys outputCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 28How NX depends on U.S. goods become more expensive relative to foreign goods EX, IM NX
11、CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 29U.S. Net Exports and the Real Exchange Rate, 1975-20021975-2002CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 30The net exports functionThe net exports function reflects this inverse relationship between NX and :NX = NX ( )CHAPTE
12、R 5CHAPTER 5 The Open Economy The Open Economyslide 31The NX curve for the U.S.0NXNX()1When is relatively low, U.S. goods are relatively inexpensiveNX(1)so U.S. net exports will be highCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 32The NX curve for the U.S.0NXNX()2At high enough values
13、of , U.S. goods become so expensive that NX(2)we export less than we importCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 33How is determinedThe accounting identity says NX = S - IWe saw earlier how S - I is determined:S depends on domestic factors (output, fiscal policy variables, etc)I
14、is determined by the world interest rate r *So, must adjust to ensureCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 34How is determinedNeither S nor I depend on , so the net capital outflow curve is vertical. NXNX( ) adjusts to equate NX with net capital outflow, S - I. 1NX 1CHAPTER 5CHAP
15、TER 5 The Open Economy The Open Economyslide 35Interpretation: supply and demand in the foreign exchange marketdemand: Foreigners need dollars to buy U.S. net exports.NXNX( )supply: The net capital outflow (S - I ) is the supply of dollars to be invested abroad. 1NX 1CHAPTER 5CHAPTER 5 The Open Econ
16、omy The Open Economyslide 36Four experiments1.Fiscal policy at home2.Fiscal policy abroad3. An increase in investment demand4. Trade policy to restrict importsCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 371. Fiscal policy at homeA fiscal expansion reduces national saving, net capital o
17、utflows, and the supply of dollars in the foreign exchange market causing the real exchange rate to rise and NX to fall.NXNX( ) 1NX 1NX 2 2CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 382. Fiscal policy abroadAn increase in r* reduces investment, increasing net capital outflows and the
18、supply of dollars in the foreign exchange market causing the real exchange rate to fall and NX to rise.NXNX( )NX 1 1 2NX 2CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 393. An increase in investment demandAn increase in investment reduces net capital outflows and the supply of dollars in
19、 the foreign exchange market NXNX( )causing the real exchange rate to rise and NX to fall. 1NX 1NX 2 2CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 404. Trade policy to restrict importsNXNX ( )1NX1 1NX ( )2At any given value of , an import quota IM NX demand for dollars shifts rightTrade
20、 policy doesnt affect S or I , so capital flows and the supply of dollars remains fixed. 2CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 414. Trade policy to restrict importsNXNX ( )1NX1 1NX ( )2Results: 0 (demand increase) NX = 0(supply fixed) IM 0 (policy) EX 0(rise in ) 2CHAPTER 5CHAPT
21、ER 5 The Open Economy The Open Economyslide 42The Determinants of the Nominal Exchange RateStart with the expression for the real exchange rate:Solve it for the nominal exchange rate:CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 43The Determinants of the Nominal Exchange RateSo e depends
22、 on the real exchange rate and the price levels at home and abroadand we know how each of them is determined:CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 44The Determinants of the Nominal Exchange RateWe can rewrite this equation in terms of growth rates (see “arithmetic tricks for work
23、ing with percentage changes,” Chap 2 ):For a given value of , the growth rate of e equals the difference between foreign and domestic inflation rates. CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 45Inflation and nominal exchange ratesPercentage changein nominalexchange rate10 9 8 7 6 5
24、4 3 2 1 0 -1 -2 -3 -4Inflation differentialDepreciationrelative to U.S. dollarAppreciationrelative to U.S. dollar-1-2-3102345687FranceCanadaSwedenAustraliaUKIrelandSpainSouth AfricaItalyNew ZealandNetherlandsGermanyJapanBelgiumSwitzerlandCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 46Pu
25、rchasing Power Parity (PPP)def1: a doctrine that states that goods must sell at the same (currency-adjusted) price in all countries.def2: the nominal exchange rate adjusts to equalize the cost of a basket of goods across countries. Reasoning: arbitrage, the law of one priceCHAPTER 5CHAPTER 5 The Ope
26、n Economy The Open Economyslide 47Purchasing Power Parity (PPP)PPP: e P = P* Cost of a basket of domestic goods, in foreign currency.Cost of a basket of domestic goods, in domestic currency.Cost of a basket of foreign goods, in foreign currency.Solve for e : e = P*/ P PPP implies that the nominal ex
27、change rate between two countries equals the ratio of the countries price levels. CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 48Purchasing Power Parity (PPP)If e = P*/P, then and the NX curve is horizontal:NXNX = 1S - IUnder PPP, changes in (S - - I ) have no impact on or e. CHAPTER 5C
28、HAPTER 5 The Open Economy The Open Economyslide 49Does PPP hold in the real world?No, for two reasons:1.International arbitrage not possible.nontraded goodstransportation costs2.Goods of different countries not perfect substitutes.Nonetheless, PPP is a useful theory:Its simple & intuitiveIn the real
29、 world, nominal exchange rates have a tendency toward their PPP values over the long run. CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 50no changeno change no changeno change 129.4-2.019.46.317.43.9115.1-0.319.91.119.62.2closed economysmall open economyactual changeNXIrSG T1980s1970sDat
30、a: decade averages; all except r and are expressed as a percent of GDP; is a trade-weighted index. CASE STUDYCASE STUDYThe Reagan Deficits revisitedCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 51The U.S. as a large open economySo far, weve learned long-run models for two extreme cases:c
31、losed economy (chapter 3)small open economy (chapter 5)A large open economy-like the U.S.-is in between these two extremes. The analysis of policies or other exogenous changes in a large open economy is a mixture of the results for the closed & small open economy cases. For example CHAPTER 5CHAPTER
32、5 The Open Economy The Open Economyslide 52NXIrlarge open economysmall open economyclosed economyA fiscal expansion in three modelsfalls, but not as much as in small open economyfallsno changefalls, but not as much as in closed economynochangefallsrises, but not as much as in closed economynochanger
33、isesA fiscal expansion causes national saving to fall.The effects of this depend on the degree of openness:CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 53Chapter summary1. Net exports-the difference between exports and importsa countrys output (Y ) and its spending (C + I + G)2.Net capi
34、tal outflow equalspurchases of foreign assets minus foreign purchases of the countrys assetsthe difference between saving and investment3.National income accounts identities:Y = C + I + G + NXtrade balance NX = S - - I net capital outflowCHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 54Ch
35、apter summary4.Impact of policies on NX :NX increases if policy causes S to rise or I to fallNX does not change if policy affects neither S nor I. Example: trade policy5.Exchange ratesnominal: the price of a countrys currency in terms of another countrys currencyreal: the price of a countrys goods i
36、n terms of another countrys goods.The real exchange rate equals the nominal rate times the ratio of prices of the two countries.CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 55Chapter summary6.How the real exchange rate is determinedNX depends negatively on the real exchange rate, other
37、things equalThe real exchange rate adjusts to equate NX with net capital outflow7.How the nominal exchange rate is determinede equals the real exchange rate times the countrys price level relative to the foreign price level. For a given value of the real exchange rate, the percentage change in the nominal exchange rate equals the difference between the foreign & domestic inflation rates.CHAPTER 5CHAPTER 5 The Open Economy The Open Economyslide 56
